Green Bitcoin is all the rage right now – so much so that a ‘Bitcoin Mining Council’ was formed in an effort to promote both carbon neutrality and reduced energy consumption. Comprised of high-profile individuals like Jack Dorsey, Michael Saylor, and more, this council marked only the beginning of such endeavours. In the weeks since its formation, we have now seen various examples of companies/nations taking unique approaches towards achieving ‘green BTC’.
Before diving in to a few recent examples, what exactly is carbon neutrality? The phrase simply refers to a ratio between how much CO2 an individual or company produces, and offsetting measures taken. In a perfect world, this would be a 0:0 or better.
Reduction measures can be achieved in a couple of ways. Either reduce the amount of CO2 generated from the get-go, or offset/cancel-out one’s environmental footprint through planting trees, supporting wind farms, etc.
While the environmental impact of BTC mining can be debated, the fact remains that many of the operations located in countries like China rely on coal for their power needs – an inherently dirty means of energy production. This has resulted in calls for carbon accountability and green BTC within the sector.
These calls for green BTC and carbon accountability have seen various companies rise to the challenge in recent weeks, with the following examples highlighting this.
In a momentous decision, El Salvador has just announced that BTC is now legal tender within its borders. This is huge because it not only validates the legitimacy of the asset, but it will require any company with the technical ability doing business within its borders to develop the infrastructure needed for servicing BTC transactions – developments which will no doubt spill into operations of companies operating on a global scale.
Equally interesting is El Salvador’s immediate decision to begin mining BTC through use of volcanic based geo-thermal activity. Nayib Bukele, President of El Salvador recently tweeted, “Our engineers just informed me that they dug a new well, that will provide approximately 95MW of 100% clean, 0 emission geothermal energy from our volcanos.”
Geo-thermal energy is one of the most abundant renewable energy sources around the world, in addition to being one of the cleanest. It is commonly used in not only residential, but also commercial applications. In this particular instance Jack Dorsey said it best when he stated, “bitcoin incentivizes renewable energy”.
Square + Blockstream
Different regions have access to different forms of renewable energy. For El Salvador, this is obviously volcanic based geo-thermal. In the United States however, one of the most common examples are solar farms.
Square Inc. and Blockstream have just announced a collaborative effort which will see the pair build a U.S. based BTC mining facility reliant solely upon solar power for its energy needs.
Blockstream states, “While we know that many mining operations throughout the world, including ours, already rely on renewable energy (as it is the most cost-effective power available), we hope that the open and transparent nature of this project will become a model that other businesses can learn from. We hope to show that a renewable mining facility in the real world is not only possible but also prove empirically that Bitcoin accelerates the world toward a sustainable future.”
The pair indicate that its first facility is being built as a proof-of-concept, with hopes that it will become a blueprint for eventually scaling operations. This particular endeavour will see Square Inc. contribute $5 million USD towards its completion – a move representing progress towards its self-professed goal of becoming fully carbon-neutral within a decade.
While the above examples each look to minimize environmental impact through use of clean energy, there are companies such as One River, which look to do the same through offsetting measures.
In a novel approach, One River has recently given institutional clients the ability to invest in carbon-neutral digital assets through its popular hedge fund. This carbon-neutrality is achieved through use of an index which tracks Bitcoin market activity, determining the amount of offsetting measures required. The process results in a slightly higher fees, stated by One River to be roughly $55/yr./BTC at time of writing. Despite the cost of offsetting, One River indicates that this move has been received quite well.
Sebastian Bea, President of One River, spoke on this reception, stating, “We believe it is reflective of a broader shift in investor preferences, as transparency mounts across institutional portfolios…Every new investment will increasingly be held to account for its carbon footprint.”
Fungibility in Question?
An interesting side-effect of demands for green BTC surrounds the idea of fungibility. As a fungible asset, 1 BTC can not be distinguished from another. There are those however which have proposed an introduction of non-fungibility in to the network – the purpose of which would be to distinguish BTC mined through green practices, and those that were not.
Although certain mining outfits are onboard with the idea (as they would be able to charge a premium for BTC mined in a green manner), it undermines one of the most important key traits of a decentralized digital currency such as Bitcoin.
The idea is believed by many to be fundamentally flawed as it is expected that demand for BTC will continue to outpace its rate of production. With less than 1000 BTC mined per day, companies would be forced to tap in to the ‘dirty’ supply of BTC on the market in order to satiate their needs.
Furthermore, it would be very interesting to see how such an idea could be implemented. With the use of tumblers, decentralized exchanges, etc., it would be next to impossible for a BTC to retain its status as ‘green’.
Thankfully with a growing amount of environmentally conscious measures occurring, such as those described here today, the idea of creating a subset of BTC should be looked back upon as a flawed and short-lived one.